Inflows in equity mutual fund dropped for the second straight month in May amid the heightened uncertainty and volatility in the market due to the COVID-19 crisis. However, inflows and addition of new folios in large cap funds remained steady.
Due to the harsh economic scenario, risk aversion among of investors has risen and they are now looking for safer avenues to preserve their capital. Large cap mutual funds can address the needs of such investors looking for stability along with capital appreciation. The ability of large caps to grow even during adverse market conditions makes it a suitable contender to be a part of one’s core portfolio.
ICICI Pru Bluechip Fund (IPBF) is one of the most popular and the largest scheme (in terms of corpus) in the large cap funds category that aims to maximize long term returns by investing in a basket of large and well established stocks, chosen without any sector bias.
Graph 1: Growth of Rs 10,000 if invested in ICICI Pru Bluechip Fund 5 years ago
Data as on June 10, 2020
(Source: ACE MF)
IPBF is one of the most popular funds in the large cap category that not only has the ability to limit the downside risk for its investors during uncertain markets, but also rewards with market beating returns during upside rallies. The fund has generated returns at CAGR of 11.6% since its inception in 2008. It has been able to generate above average returns and compete well with some of its prominent large cap category peers. Over the past five years, the fund has managed to maintain a lead over the benchmark and has appreciated at 6.6% CAGR, in comparison to the benchmark return of around 6.1% CAGR. The risk in IPBF has been far lower than the benchmark, thus generating reasonable risk-adjusted returns for its investors.
Table: ICICI Pru Bluechip Fund’s performance vis-a-vis category peers
|Scheme Name||Corpus (Cr.)||1 Year (%)||2 Year (%)||3 Year (%)||5 Year (%)||7 Year (%)||Std Dev||Sharpe|
|Axis Bluechip Fund||13,003||-4.51||3.82||9.01||9.77||13.38||16.70||0.05|
|Canara Rob Bluechip Equity Fund||459||-2.10||4.29||6.69||9.03||12.32||17.81||0.00|
|Edelweiss Large Cap Fund||162||-10.46||-1.92||3.42||5.82||10.91||19.40||-0.04|
|BNP Paribas Large Cap Fund||747||-5.82||2.36||3.34||6.59||13.03||17.73||-0.04|
|JM Large Cap Fund||548||-2.41||1.19||3.03||4.85||10.33||8.83||-0.15|
|Mirae Asset Large Cap Fund||15,175||-12.67||-1.00||2.85||8.52||15.08||19.91||-0.05|
|Invesco India Largecap Fund||192||-9.99||-1.54||2.82||6.56||11.91||19.38||-0.04|
|IDFC Large Cap Fund||410||-9.19||-1.80||2.32||5.87||9.22||19.12||-0.05|
|LIC MF Large Cap Fund||309||-9.03||-0.46||2.23||4.98||10.63||17.94||-0.06|
|ICICI Pru Bluechip Fund||21,766||-12.72||-2.85||2.07||6.58||11.79||19.65||-0.06|
|NIFTY 100 – TRI||-13.18||-2.47||2.31||6.05||9.93||20.07||-0.06|
Returns are point to point and in %, calculated using Direct Plan – Growth option. Those depicted over 1-Yr are compounded annualised.
Data as on June 10, 2020
(Source: ACE MF)
*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.
IPBF’s performance has been nearly in line with its benchmark Nifty 100 – TRI as well as the category average on 1-year to 5-year returns basis. Over the longer time horizon of 7 years the fund generated a lead of 1-2 percentage point CAGR over the benchmark and category average.
In terms of risk-reward, IPBF has generated reasonable risk-adjusted returns for its investors. While its Standard Deviation has been nearly in line with the benchmark and category average, its risk-adjusted returns i.e. Sharpe has been far superior to most of the large cap category peers.
Investment strategy of ICICI Pru Bluechip Fund
Categorised as a large cap fund, IPBF is mandated to invest minimum 80% of its assets in equity and equity related instruments of large cap companies. IPBF follows process based investment strategy to identify quality large cap stocks forming a part of top 100 companies by market capitalization. While the fund largely focuses on growth, it has shown some flair towards value as well.
IPBF is a pure large cap fund. It has seen months with almost negligible exposure to mid and small caps. The fund predominantly follows bottom up approach to pick high growth oriented quality stocks for its portfolio. While picking stocks the fund managers look for scalability of the company and give high weightage to management track record and scope of improving profitability. The fund typically follows buy and hold strategy, looking for long term holding period and keeps its churning under check.
Graph 2: Top portfolio holdings in ICICI Pru Bluechip Fund
Holding in (%) as on May 31, 2020
(Source: ACE MF)
As on May 31, 2020, IPBF’s portfolio was spread across 64 stocks. The top 10 holdings commanded about 49% of the portfolio. The fund held its major exposure in large sized stocks like HDFC Bank, Infosys and Bharti Airtel, Reliance Industries and ICICI Bank. Most of these names have been prominent holdings in the fund’s portfolio for well over 2 to 3 years now.
Stocks like Bharti Airtel, Avenue Supermarts, SBI Life Insurance Company, Reliance Industries, Asian Paints, Cipla, etc. contributed the most to the fund’s gain in the last one year, whereas Axis Bank, HDFC Bank, L&T, ICICI Bank, Indian Oil Corp, SBI, ITC, ONGC among others eroded some of its gains.
In terms of IPBF’s sector allocation Financials, Infotech, Consumption and Petroleum occupy the top spot in the portfolio together accounting for around 58% of its assets. The remaining part of the fund’s portfolio is diversified across range of sectors like Auto, Telecom, Power, Pharma, Engineering and so on.
IPBF has a proven track record of identifying fundamentally sound stocks in the large cap space. The current fund managers have adopted the fund well and have maintained its superior track record. Its pure large cap strategy can help it to survive the volatility and reward investors willing to stay invested in the fund for stable returns in the long run. IPBF does not react strongly to market events and maintains a long-term focus. This makes IPBF suitable for long-term investors who are looking for stability of large caps along with capital appreciation.
Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
This article first appeared on PersonalFN here